Five-step investment roadmap for early-stage partnerships in pharma

29 May 2017

Partnerships can drive more early-stage assets into clinical trials, writes Ben van der Schaaf, a principal with Arthur D Little.

Investors who see early-stage compounds and indications as valuable assets can provide the capital for, and share the risk involved in, getting a promising new therapy through development and on to market launch.

Funding a clinical trial today can cost pharma companies upwards of $100 million, and that does not even take into account the costs of marketing and distribution necessary for a new life-enhancing therapy to reach patients. Global pharma businesses that spent the last decade building a robust pipeline of early-stage compounds and indications are now faced with a wide portfolio of potential assets without the resources to fund their development. The result? Drug makers that have invested to ensure strong R&D pipelines are now losing billions each year in potential revenue as promising new therapies sit dormant, waiting for their patents to expire. 

Innovative strategists in big pharma are exploring a new way to claw back some of these costs, and expand the number of new therapies that go through to the development and clinical trial stage. In a word: partnerships. Working with CROs, universities, and patient advocacy organisations, drug makers can find investors who see their compounds and indications as valuable assets, and are willing to provide the capital and share the risk involved in getting a promising new therapy through the development stage, regulatory approvals, and launched to market.

Companies interested in partnering to fund lower-priority drug trials should consider this five-step investment road-map to help them explore the possibilities: 

A 5-step investment roadmap for early-stage partnerships in pharma

Identify clinical trials

When reviewing their portfolio of de-prioritised new therapies, drug makers must make tough choices about which clinical trials will attract external investors and be profitable once in market. Trials need to be relevant and complementary. The relevance of a trial is based on its potential market demand, and will predict the value of the development asset if trials are successful and it is approved by regulators.

Packaging a number of trials for new drugs in the same therapy area is an attractive offer for investors, and will reduce upfront costs. Even trials in the same therapy area must be complementary, in the form of geography, indication, trial duration, patients, and so on, to realise these operational advantages and identify the right CRO to execute them.

Remember, a real transfer of risk from the biopharma company to other parties is required for the partnership to help the drug maker develop its assets without adding development costs to its bottom line. A clinical trial with a 95% probability of success would not satisfy this requirement, as it would just be a financing arrangement camouflaged as an investment.

Find partners for funding and execution

A successful partnership will bring together the biopharma’s science and data, the CRO’s trial operation capability and capacity, as well as the investors’ funds and knowledge of structuring and exiting such transactions. Finding the right CRO should be based on its location, track record, and expertise in the relevant therapy area. 

Finding the right investors takes careful targeting and multiple approaches. These could be venture capitalists specialising in biopharma, non-profit organisations and patient groups with a focus on a specific therapy area, and other types of investors with interest in the specific disease area or public health issue.

Plan for partnerships in pharma

Develop an operating model and structure

Once partners are committed to the project, the next step is to develop a legal structure and financing arrangement. The new entity could be a joint venture or special-purpose entity, established solely to activate and manage the execution of the included trials, with governance by representatives from all partners. Setting clear goals for each partner and carrying out a full risk assessment are critical to setting the new organisation on a solid foundation. The risk assessment must include thorough due diligence and a clear exit strategy that ensures all partners are clear of the outcomes and their role in delivering the final goals.

Activate and execute

Over the next two-to-four years the new organisation will work to complete development of the selected potential therapies. This will mean establishing processes and roles upfront to ensure efficient and effective operations. Consider the following four areas before operations begin:

  • Technical: have you established a protocol that can deliver the clinical data required to support an increase in product value?
  • The commercial value of the trial: is the market assessment valid, and is there real revenue potential for the drug(s) coming out of it?
  • Operational: are the trials in question designed in such a way that they can be executed efficiently and on time, to deliver the necessary cost savings? Are the proposed trials operationally complementary?
  • Cultural: have all partners come together to develop shared norms and agreed ways of working that will ensure successful progress and a clear exit once the investment value has been realised?


The partnership must have a clear, pre-agreed process for closing out of the relevant trials, realising value for each partner in line with the contract, and effectively dispersing, or disposing of, accrued assets. 

The pharma industry is already well versed in working in partnership at both the drug discovery and marketing and distribution stages. Building these new partnerships to fund clinical trials and get new life-saving therapies to market is a natural next step for those with robust R&D pipelines, and will result in improved value creation for companies, and improved quality of life for patients.


Privately-owned UK pharmaceutical companies are thriving

04 April 2019

Britain’s 50 fastest-growing privately-owned pharmaceutical companies have all increased sales by at least 10% in each of their last two financial years, new research reveals, facing down headwinds such as Brexit and NHS spending pressures to deliver outstanding performance. 

According to data by Alantra, a corporate finance firm with over 280 professionals globally (of which 70 are based in the UK), pharmaceutical companies in the country are thriving. “These companies have achieved remarkable rates of growth,” said Tom Cowap, a Director in Alantra’s UK advisory business. “Many of UK’s smaller and privately-owned businesses often lead their markets globally.”

The fastest-growing pharma player in the industry – Qualasept Pharmaxo, a specialist pharmacy provider and clinical homecare company – achieved annualised sales growth of 77% over its last two financial years. The analysis reveals that firms that have made the prestigious list differentiate themselves through their ability to isolate and then communicate a diverse set of value drivers, including societal issues such as the economic case for a product, as well as patient outcomes. 

One fast grower, Prescient Healthcare Group, is focused on advising drug development and commercialisation teams (executives) for some of the largest pharmaceutical companies, as well as the smaller firms and biotechs. “We help them differentiate their assets and brands and understand the priorities of the key stakeholders who will influence and enable commercial success and patient access,” said Rakesh Verma, the company’s President of EMEA and APAC.

Pharmaceutical companies in the UK are thrivingAt Oxford PharmaGenesis, Chief Operating Officer Richard White agrees. “We no longer refer to ourselves as a medical communications business because that is too narrow,” he said. “We think HealthScience communications is a better representation of our wider range of activities: in growing areas such as value demonstration and patient communications, for example, but also in talking to a wider audience that still includes physicians, but also spans payers, patients, regulators and even policymakers.” 

For Mark Jeffery, a founding director of The Research Partnership, this shift has meant his firm now provides its specialist market research to pharmaceuticals working at every stage of the product cycle. His company is as at home researching how a marketplace might change over the next 15 years as its is analysing demand for a specific new product or forecasting future sales of an established product going off-patent. “This is a global market, with emerging market customers becoming more and more important to us,” Jeffery says. “Our value driver is the strategic direction we can give clients based on the data.” 

This is not to suggest a broader product offering will erode the importance of specialist skills. Nucleus Global Chairman Stephen Cameron said, “The complexity of the compounds that clients are developing means they need real specialist expertise in niche areas – we invest heavily in recruiting and retaining the right people to meet those needs, and talent is going to be a battleground for our sector.” Nevertheless, burgeoning demand is driving a wave of consolidation amongst the consultants. The last 12 months alone have seen medical communications group Fishawack acquire creative consultant Blue Latitude and Peloton Advantage buy Open Health Communications. Private equity interest in the sector has also been heightened.

Alex Marshall, Partner at CIL Consultants, a management consultancy with specialist teams covering this space, expects this to continue. “This is a rare opportunity to invest in a market where the leading players are generating organic growth of 10% or more each year,” he says. “It’s an industry that remains reasonably fragmented, plus emerging trends such as digitalisation and the growing importance of health economics are only just getting going.” 

Expect international expansion to be an important theme too, especially in developing and emerging markets. Prescient Healthcare Group’s Rakesh Verma says the growth of the middle classes, particularly in developing economies, will underpin a sustained increase in demand for healthcare, even if economic and political instability present short-term challenges. “These markets are going to be hugely important over the longer term, as their middle class populations grow and their governments move towards universal healthcare models,” Verma says.

“This presents new challenges for commercialising products, as pharma and biotechs have to navigate regulatory regimes they are less familiar with. The key will be to focus on individual countries, rather than falling into the trap of targeting regions or country grouping acronyms; you need to build the right infrastructure and pricing model for each specific market.”